978-0134492513 Chapter 2 Lecture Notes Part 1

Chapter 2

COMPANY AND MARKETING STRATEGY:

PARTNERING TO BUILD CUSTOMER

ENGAGEMENT, VALUE, AND RELATIONSHIPS

MARKETING STARTER: CHAPTER 2

Starbucks’s Marketing Strategy: Delivering “The Starbucks Experience”

Synopsis

Starbucks met with enormous early success by focusing not just on coffee but on the coffee-drinking

experience. The company has since taken a bumpy ride from boom to bust and back to boom again. Along the

way, it learned that a good marketing strategy means more than just growth, sales, and profits. It means

skillfully engaging customers and creating value for them. At its core, Starbucks doesn’t sell just coffee, it sells

“The Starbucks Experience.”

After a period of frantic growth, Starbucks refocused on the “experience” and is once again fully engaged with

customers. Starbucks has built customer engagement and brand community through digital and mobile

platforms. It delivers the one-of-a-kind Starbucks Experience and, as a result of good performance on this

objective, revenues and profits have shot up.

Discussion Objective

A brief discussion of the Starbucks story will help to solidify the importance of creating a company-wide

marketing strategy that is customer focused, and revamping it when necessary. This theme began in Chapter 1

and continues in Chapter 2. It also provides a nice opportunity to examine overall company strategy and

mission, and their relationship to marketing strategy and activities. Finally, Starbucks provides a great example

of how companies are taking new directions in building customer relationships and brand community. Starbucks

has almost always focused on the brand experience. In the early years, it built the brand’s image through

word-of-mouth and customer focus. Now, it focuses a sizable portion of its marketing efforts on creating more

personal and involving brand experiences.

Starting the Discussion

To make the chapter-opening Starbucks story more personally relevant to the class, begin by asking, “How

many of you drink Starbucks? Has Starbucks changed its offerings in the time you have been buying its

products? In what way?” After a brief opening discussion, go online with students to explore Starbucks’s

website (http://www.starbucks.com).

Direct the discussion using the following questions. As always, keep the discussion moving with plenty of

student input.

Discussion Questions

1. What is Starbucks really selling? What are customers really buying? How and how deeply do customers

relate to the Starbucks brand? (Starbucks sells a lot more than just coffee. When customers purchase

something at Starbucks, they are buying a brand experience. Ask students what that brand experience

feels like to them.)

2. If you worked as a Starbucks operations manager, financial analyst, IT specialist, or human resources

manager, why would it be important for you to understand Starbucks’s marketing strategy? This question

digs into the relationship between corporate strategy and marketing strategy, and marketing’s role in the

broader company strategy. Non-marketing students often ask, “Why do I need to understand marketing?”

The answer—as noted in Chapter 1 and later in Chapter 2—everyone in the company needs to align

behind the mission of creating customer value.

3. How does the chapter-opening Starbucks story relate to what comes later in the chapter? (This question

transitions the discussion into Chapter 2 topics such as overall company strategy and mission,

marketing’s role, customer-driven marketing strategy and planning, and measuring marketing ROI.)

CHAPTER OVERVIEW

Use Power Point Slide 2-1 here

In the first chapter, we explored the marketing process by which companies create value for

the consumer in order to capture value in return. In this chapter, we look at designing

customer-driven marketing strategies and constructing marketing programs. First, we look at

the organization’s overall strategic planning, which guides marketing strategy and planning.

Next, we discuss how marketing partners work closely with others inside and outside the

firm to create value for customers. We then examine marketing strategy and planning—how

marketers choose target markets, position their market offerings, develop a marketing mix,

and manage their marketing programs. Lastly, we will look at the step of measuring and

managing return on marketing investment.

CHAPTER OBJECTIVES

Use Power Point Slide 2-2 here

1. Explain company-wide strategic planning and its four steps.

2. Discuss how to design business portfolios and develop growth strategies.

3. Explain marketing’s role under strategic planning and how marketing works with its

partners to create and deliver customer value.

4. Describe the elements of a customer value-driven marketing strategy and mix and the

forces that influence them.

5. List the marketing management functions, including the elements of a marketing

plan, and discuss the importance of measuring and managing marketing return on

investment.

CHAPTER OUTLINE

p. 38 INTRODUCTION

Starbucks began by offering coffee in a European-style

coffeehouse, a “third place.” The goal was to engage

customers and provide customer value. As the market grew,

Starbucks chose an aggressive growth strategy to compete

with everything from independent coffeehouses to fast-food

restaurants.

When Starbucks stumbled, it overcame the struggles by

returning to its focus on customers and providing “The

p. 39

Photo: Starbucks

Starbucks Experience.” In the digital age, Starbucks works

to build deep and strong relationships with customers.

It engages customers by talking with them rather than at

them. It builds a Starbucks brand community.

Since the Great Recession and returning to a

customer-centered focus, Starbucks’s revenues and profits

have grown. This outcome seems to confirm the wisdom of

Starbucks’s marketing strategy.

Assignments, Resources

Use Small Group Assignment 1 here

Use Individual Assignment 1 here

Opening Vignette Questions

1. Discuss Starbucks’s marketing strategy in terms

of delivering increased customer value. What is

inherently better about the current Starbucks

marketing from the customer’s point of view?

2. For a while, Starbucks lost its “cool” factor.

Based on your experience and perception, has

the company gotten it back? Why or why not?

3. What comes next for Starbucks in the 21st

century? What new marketing strategies might

the company develop to remain fresh and

relevant?

p. 40

PPT 2-3

PPT 2-4

Explain company-wide strategic planning and its four

steps.

COMPANY-WIDE STRATEGIC PLANNING:

DEFINING MARKETING’S ROLE

The hard task of selecting an overall company strategy for

long-run survival and growth is called strategic planning.

Strategic planning is the process of developing and

maintaining a strategic fit between the organization’s goals

and capabilities and its changing market opportunities.

Strategic planning sets the stage for the rest of the planning

in the firm.

Companies typically prepare annual plans, long-range

plans, and strategic plans.

Learning Objective

1

p. 40

Key Term:

Strategic planning

p. 41

Figure 2.1:

Steps in Strategic

Planning

PPT 2-5

At the corporate level, the company starts the strategic

planning process by defining its overall purpose and

mission (see Figure 2.1). It then creates detailed supporting

objectives that guide the entire company. Next, headquarters

decides what portfolio of businesses and products is best for

the company and how much support to give each one. In

turn, each business and product develops detailed marketing

and other departmental plans that support the

company-wide plan. Thus, marketing planning occurs at the

business-unit, product, and market levels.

Assignment, Resources

Use Discussion Question 2-1 here

Use Video Case here

Troubleshooting Tip

Most students have had no experience with strategy

or strategy formulation (especially at the under–

graduate level). Because their background in

strategy is weak, their ability to strategically plan is

also weak. The best way to attack this problem is to

follow the explanation sequence provided by the

text. Before this discussion begins, however, it

might be useful to find areas where students have

had strategic planning experience (such as athletics,

student politics, games, video games, chess,

computer games, etc.). By asking the students to

recall and relate these experiences, parallels can be

drawn to business strategies and the plans that result

from these strategies (for example, think of all the

military and athletic terms that might be used to

describe a business strategy—i.e., flanker movement

for flanker brands).

p. 40

PPT 2-6

Defining a Market-Oriented Mission

Many organizations develop formal mission statements. A

mission statement is a statement of the organization’s

purpose—what it wants to accomplish in the larger

environment.

A clear mission statement acts as an “invisible hand” that

guides people in the organization.

A market-oriented mission statement defines the business in

terms of satisfying basic customer needs.

Management should avoid making its mission too narrow or

too broad.

p. 41

Key Term: Mission

statement

p. 41

Table 2.1: Product-

versus

Market-Oriented

Business

Definitions

Missions should be realistic, specific, consistent with the

market environment, based on the company’s distinctive

competencies, and motivating.

Assignments, Resources

Use Critical Thinking Exercise 2-8 here

p. 42

PPT 2-7

p. 42

PPT 2-8

PPT 2-9

Setting Company Objectives and Goals

The company’s mission needs to be turned into detailed

supporting objectives for each level of management.

The mission leads to a hierarchy of objectives, including

business objectives and marketing objectives.

Marketing strategies and programs must be developed to

support these marketing objectives.

Review Learning Objective 1: Explain company-wide

strategic planning and its four steps.

Discuss how to design business portfolios and develop

growth strategies.

Designing the Business Portfolio

A business portfolio is the collection of businesses and

products that make up the company.

The best portfolio is the one that best fits the company’s

strengths and weaknesses to opportunities in the

environment.

p. 42

Photo: CVS Health

Learning Objective

2

p. 43

Key Term: Business

portfolio

Assignments, Resources

Use Real Marketing 2.1 here

Use Additional Project 1 here

Use Think-Pair-Share 1 here

p. 43

p. 45

PPT 2-10

Analyzing the Current Business Portfolio

The major activity in strategic planning is business

portfolio analysis, whereby management evaluates the

products and businesses making up the company.

The first step in business portfolio analysis is to identify the

key businesses that make up the company, the strategic

business units (SBUs). An SBU can be a company division,

a product line within a division, or a single product or

brand.

p. 43

Key Terms:

Portfolio analysis

PPT 2-11

PPT 2-12

The next step in business portfolio analysis calls for

management to assess the attractiveness of its various SBUs

and decide how much support each deserves.

Most standard portfolio-analysis methods evaluate SBUs on

two important dimensions—the attractiveness of the SBU’s

market or industry and the strength of the SBU’s position in

that market or industry.

The Boston Consulting Group Approach. The best-known

portfolio-planning method was developed by the Boston

Consulting Group.

This matrix defines four types of SBUs:

Stars: high-growth market, high-share product

Cash cows: low-growth market, high-share product

Question marks: low-share product, high-growth

market

Dogs: low-share product, low-growth market

Once it has classified its SBUs, the company must

determine what role each will play in the future.

The company can invest more in the business unit in order

to grow its share. It can invest just enough to hold the

SBU’s share at the current level. It can harvest the SBU,

milking its short-term cash flow regardless of the long-term

effect. Or, it can divest the SBU by selling it or phasing it

out.

p. 43

Key Term:

Growth-share

matrix

p. 45

Figure 2.2: The

BCG Growth-Share

Matrix

Assignments, Resources

Use Discussion Question 2-2 here

Use Small Group Assignment 2 here

Use Individual Assignment 2 here

Troubleshooting Tip

This simple matrix is the basis for many portfolio

analysis techniques. An easy way to cover this

material quickly is to assign each of the four parts to

four students prior to class. Next, have them respond

to example suggestions (illustrations of the four

cells) from their classmates. This will reinforce the

material for the entire class.

p. 46

PPT 2-13

p. 46

PPT 2-14

PPT 2-15

Problems with Matrix Approaches

Portfolio-analysis approaches have limitations.

They can be difficult, time-consuming, and costly to

implement.

Management may find it difficult to define SBUs

and measure market share and growth.

These approaches focus on classifying current

businesses but provide little advice for future

planning.

Because of such problems, many companies have dropped

formal matrix methods in favor of more customized

approaches that are better suited to their specific situations.

Developing Strategies for Growth and Downsizing

Designing the business portfolio involves finding

businesses and products the company should consider in the

future.

Marketing has the main responsibility for achieving

profitable growth for the company.

Marketing must identify, evaluate, and select market

opportunities and lay down strategies for capturing them.

The product/market expansion grid looks for new

opportunities.

The product/market expansion grid is shown in Figure

2.3.

Market penetration involves making more sales to

current customers without changing the product.

Market development involves identifying and

developing new markets for its current products.

Product development involves offering modified or

new products to current markets.

Diversification involves a company starting up or

buying businesses outside of its current products and

markets.

p. 46

Photo: GE

p. 47

Figure 2.3: The

Product/Market

Expansion Grid

p. 46

Key Term:

Product/market

expansion grid

p. 47

Key Terms: Market

penetration, market

development,

product

development,

diversification

p. 47

Ad: Under Armour

PPT 2-16 Companies must also develop strategies for downsizing

their businesses. The company must carefully prune,

harvest, or divest brands or businesses that no longer fit its

overall strategy or are unprofitable.

Review Learning Objective 2: Discuss how to design

business portfolios and develop growth strategies.

Assignments, Resources

Use Critical Thinking Exercise 2-6 here

Use Online, Mobile, and Social Media Marketing

here

Use Marketing Ethics here

Troubleshooting Tip

Many students will have an incomplete under–

standing of the growth strategies shown in the

product/market expansion grid. Though these areas

are carefully described in the text, it is useful to

make sure that students understand the mix of

alternatives available to the strategist. One way to do

this is to pick another example besides the Under

Armour example used in the text and have the

students suggest acceptable alternatives. Remind

students to think about how the example companies

have expanded or contracted in recent years. Lastly,

make students practice using the terms from the

expansion grid in their discussions so a proper

business strategy vocabulary will be built. This

practice will really help the students when an exam

rolls around.